- It is essential to be equipped with the management
and marketing strategies that work for the trends -

It was argued that in order
to enter into the Chinese market, foreign companies should get away from
conservative management style and, above all, be careful not to provoke public
sentiment.

According to the report
titled ‘An Analysis of Failure Cases of Foreign-invested Companies in China’,
issued by the Shanghai Branch of the Korea International Trade Association
(Chairman, Kim Young-Ju) announced on August 16th, the number of
foreign-invested companies established in China last year was 60,533, increased
by 69.8 percent year-on-year, and the total amount of foreign investment was
134.9 billion dollars. Foreign investment in China is expected to increase as
the ‘Foreign Investment Law’ was passed this March in China and the service,
manufacturing, mining, and agriculture sectors are being promoted to open.

However, the report said,
“Global companies seeking to enter into China have failed to settle down due to
▲conservative management style, ▲failure to
analyze consumer demand and trends, and ▲stimulation of
national sentiment. Therefore, Korean companies need to thoroughly prepare by
referring to the related cases

The well-known examples are
Max & Spencer that adhered to the daily brand-oriented distribution
strategy which worked in England, Best Buy that was stuck to pre-purchase and
after-sale strategy, Suzuki that failed to respond to the trend toward large
vehicles and sports utility vehicles (SUV) and Olympus that failed to create
demand due to the rapid spread of smart phones.

In particular, Italian
fashion company Dolce & Gabbana (D & G) was dismissed from China's
major online stores when boycotts sprang up as the company disturbed the public
sentiment with advertisement which made fun of Chinese people and the racist
comments about Chinese people. B & Q,, a British building materials
department store that once operated 36 stores in 25 cities in China, suffered
from huge losses due to corruption such as supplier exploitation, forced sales,
and high commissions. Carrefour of France, which entered into the Chinese
distribution market in 1995, became the target of the boycott of French
products because of the Chinese human rights protests in Paris during the 2008
Beijing Olympic Torch shipment. The company finally sold most of its shares to
Chinese distributor Suning after the case of cheating receipts that were
calculated by the different price from the price tag happened.

Shim Joon-seok, head of
Shanghai Branch of the Korea International Trade Association, said, “Foreign investment in China is surging as new foreign investment in
Shanghai in the first half of this year increased by 49.2 percent compared to
the same period of the last year.” He stressed, “Companies considering entering into China should perform preliminary
research on distribution markets and consumer trends and be careful not to
provoke the public sentiment in China even after the entry.”